What is the minimum monthly Royalty Fee for a Deka Lash franchise after the first year of operations?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
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ITEM 6 OTHER FEES
| Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty (Notes 1 and 2) | 6% of Gross Studio Sales or $600 per month, whichever is greater. After your 1 st year of operations, the minimum Royalty Fee increases to $1,000 per month. | As specified in the operations manual. Currently we collect royalties twice a month on the 5 th day following the end of each semi-monthly period. | |
| Brand | The greater of 3% of Gross Studio Sales or, after the 1 st year of operations, $500 per month. | As specified in the operations manual. Currently we collect royalties twice a month on the 5 th day following the end of each semi-monthly period. | You are required to contribute the specified Brand Development Fee into the Brand Development Fund (the "Brand Fund"). We are not obligated to maintain the Brand Fund in a separate bank account nor use the entirety of amounts collected within the same calendar year. However, we will account for collections and expenditures and track the Brand Fu |
Source: Item 6 — OTHER FEES (FDD pages 15–23)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the Royalty Fee is 6% of Gross Studio Sales or $600 per month, whichever is greater. However, after the first year of operations, the minimum Royalty Fee increases to $1,000 per month. This means that even if 6% of Gross Studio Sales is less than $1,000, the franchisee must pay a minimum of $1,000 as the Royalty Fee each month after the first year.
This minimum royalty fee has significant implications for a Deka Lash franchisee's profitability, especially in the early stages of operation. If a studio's gross sales are low, the franchisee will still be obligated to pay the $1,000 minimum, which could strain their finances. Franchisees need to carefully project their potential revenue and ensure they can meet this minimum royalty obligation, even during slower months.
Franchisors often implement minimum royalty fees to ensure a baseline income and to incentivize franchisees to grow their businesses. For Deka Lash, this policy ensures a consistent revenue stream for the franchisor while also encouraging franchisees to increase their sales beyond the threshold where 6% of gross sales exceeds the $1,000 minimum. Prospective franchisees should factor this escalating minimum royalty into their financial planning and consider how it might impact their cash flow and overall profitability.